Sometimes even the best of businesses in Texas can fall on hard times. Whether it is a downturn in the economy, an increase in competition or an unexpected loss of sales, a business may find itself floundering in a sea of debt. For some businesses, the best way out of this debt is through filing for Chapter 11 bankruptcy, also known as a reorganization bankruptcy. This can especially be useful, as filing for Chapter 11 bankruptcy can put an automatic stay on creditor actions.
When a Texan is moving forward with a Chapter 11 filing, there are certain aspects that must be considered as the case is moving forward. One is the conversion or dismissal. This grants the debtor the right to convert a Chapter 11 to Chapter 7. This is a one-time right unless the following is in effect: the debtor is not a debtor in possession; the case began as an involuntary Chapter 11; or the case was previously converted to Chapter 11 in a way that was other than at the request of the debtor. With Chapter 11, the debtor cannot have the case dismissed on request as an absolute right.
A small business that is experiencing problems in Texas and across the United States will often consider filing for bankruptcy. One question that comes to forefront during this time is whether filing for Chapter 11 bankruptcy is better than other alternatives like Chapter 7. The reality is that for businesses that would like to continue operating, Chapter 11 is generally viewed as the better option. In fact, many believe that Chapter 7 for businesses is simply an admission that the end is near and the choice of Chapter 7 is the final concession.
The theory behind Chapter 11 is certainly attractive. Create a space of time, under legal auspices, to work out a reorganization plan with creditors on how to pay off excessive debt. Typically, this vehicle is used by Texas businesses, large and small.
No industry is immune from financial difficulties. Although the news often reports on businesses such as retail stores and restaurants filing for bankruptcy, the truth of the matter is that even fields like the healthcare industry can run into money woes, forcing medical businesses and even hospitals to take legal action to protect themselves.
As online retailers like Amazon continue to dominate the market, brick and mortar retail stores in Texas continue to struggle. These businesses, which oftentimes have trouble getting people into their stores, can face massive amounts of debt as they try to either rebrand themselves or change their way of doing business to be competitive. Others just simply fail to change with the times and are left with burdensome debt that is insurmountable.
Although the economy has been steadily climbing out of the Great Recession, for many retailers in Texas and other parts of the country, financial difficulties linger. When crushing debt and limited cash flow leave these stores with an uncertain and bleak future, many of them turn to the bankruptcy system for assistance. In fact, one recent report found that just as many retail stores have sought bankruptcy protection in the first quarter of 2017 as did during the entire 2016 calendar year. Amongst these stores are Gander Mountain, Gordmans Stores, HHGregg, Wet Seal, and Limited Stores.
Taking the plunge into starting a small business is a brave move. These men and women oftentimes face financial uncertainty as they try to grow their business. Some small business owners are able to fight through the difficulties of the first few years and find longevity. Others, though, find themselves trapped by growing debt and ever aggressive creditors. Although many small business owners want to keep fighting to both save their business and climb out of debt, the reality is that many would benefit from seeking some type of debt relief.
Starting and successfully running a business can be challenging for a variety of reasons. Securing capital, managing supply chains, and maintaining successful employees can all be difficult. With adequate planning, many of these matters can be addressed. Yet, no matter how much a business plans for its future, there are always unexpected issues that arise. Increased competition, breached contracts and a changing market can all lead to unfavorable changes for a business. When this happens, a business needs to carefully consider its options with regard to its financial future.
Filing for Chapter 11 bankruptcy can be a great way to obtain a fresh financial start. Businesses in Tyler may be able to reorganize their debt, establish a payment plan and eliminate debt over a given period of time, giving them the financial freedom they need to reclaim their independence.